The Kansas Supreme Court today heard arguments from Plaintiffs and the State in the school finance case that will determine whether or not this year’s school finance bill will meet constitutionality on both equity and adequacy.

Although it is not officially part of the evidence in the case, a central point in arguments today became the school finance cost study done this year by Dr. Lori Taylor of Texas A&M University. Conservatives in Legislative leadership had hoped Taylor’s study would demonstrate that our schools were already adequately funded. Instead, the study suggested that in order to meet the goals of the state’s education plan Kansas needed to invest an additional $1.7 to 2 billion.

Justice Eric Rosen went so far as to say “Here, you all are always battling your own expert…” in response to the state taking a position contrary to the Taylor study.

Questioning was sharp and, as always, it is difficult to say for certain where the Justices are going although most observers agree that they appear to be skeptical about the adequacy of the latest legislative attempt. As we’ve indicated in previous posts, the Court’s skepticism was not completely unexpected.

The Court has promised a ruling by June 30 although it is hoped that the ruling will be sooner – especially if it might require the convening of a special legislative session.

To read more coverage of the hearing, visit one of these news reports:

Kansas NEA remains confident that whatever the Court rules, the Kansas Legislature will take their responsibility seriously and address the situation in a way that ensures our schools are open in August – that every new Kindergartener and Kindergarten parent will experience that first day together and that every rising high school senior will begin their final year on time and on track to graduate.

While the uncertainty of funding is difficult for everyone, KNEA has planned for contingencies to ease the concerns of our members throughout the state. Whatever the decision and whatever actions have to be taken, Kansas NEA will be there to work with policymakers and to protect the education of our children and the well-being of Kansas educators.

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Later this week, we will provide a more comprehensive review of the 2018 Legislative Session but for today, we talk about the taxing events of Thursday and Friday, May 3 and 4.

Two highly controversial bills dominated the discussion for these two days. One was Sub for SB 284, a bill enacting the so-called “Adoption Protection Act.” (We will report on this bill later.) The other was Sub for HB 2228, the Senate’s large corporate tax giveaway and tax cut for the wealthiest Kansans.

Both were contained in Conference Committee Reports (CCR). So you understand the order of business, a conference committee report on a Senate bill goes first to the House for action while a conference committee report on a House bill goes first to the Senate. Conference committee reports cannot be amended. There is a motion to adopt the CCR which is debated and then voted on. Both chambers must adopt the report for it to go to the Governor for his signature or veto.

Because of the controversial nature of both reports and the fact that they were running almost simultaneously, it meant the atmosphere under the dome was tense.

The tax bill (Sub for HB 2228) was really the brainchild of Senate leadership, in particular, Sen. Caryn Tyson (R-Parker). The original fiscal note on the bill as it came out of the Senate and before it went to conference was a more than $500 million loss in revenue to the state. It essentially offset all of the spending increase in K-12 education.

Fiscal notes on the measure as it was debated and amended in conference changed constantly because there was no actual way to calculate the impact of changes to Kansas income taxes before the full impact of federal income tax changes were known.

The two biggest threats to the state budget included in HB 2228 were directly tied to the federal tax act passed last December.

One of these was a provision to decouple the state income tax from the federal code so that taxpayers who could no longer itemize on the federal form could still itemize on the state form. The federal code has changed so much that many filers will no longer be able to itemize. While some taxpayers may find a federal benefit (although most will not), the loss of itemization at the state level means higher revenue collections at the state level. But because those who itemize are generally the wealthiest taxpayers (Kansas estimates only about 20% of taxpayers itemize), this revenue would come from the wealthiest Kansans.

The second big item was the “repatriation” of overseas corporate earnings. Among the federal tax changes was a provision to bring the overseas earnings of multi-national corporations back to the United States for tax purposes. These corporations have long been able to essentially shelter much of their earnings overseas to avoid U.S. taxation. These earnings are now being “repatriated” – brought back to the U.S. – and taxed. Tyson wanted to block taxation of these repatriated earnings in Kansas, a measure that is essentially a big corporate tax giveaway.

So – big item number 1 cuts taxes on the wealthiest Kansans while big item number 2 allows corporations to avoid taxation in Kansas. All while providing no relief to the 80% or more of working Kansans.

Now our attention turned to the House where it was expected the vote would be close. As we watched discussions and followed caucus discussions, it was often unclear as to which way the vote would go.

One thing we knew for certain was that if this bill were to pass, the chances that our schools would close in August would be much greater. As it is, many people think the school funding bill passed is likely not to meet adequacy but a tax cut bill that puts the budget underwater in the second year of the school finance plan is almost certain to result in rejection of the plan. Remember the Court was clear in their earlier ruling that the state needed to demonstrate the money would be available to fulfill the promise of a phased-in funding plan.

Debate on the bill in the House began mid-afternoon on Friday. Rep. Steven Johnson (R-Assaria), as chair of the House tax committee, made the motion to adopt the report. Rep. Tom Sawyer (D-Wichita), the ranking Democrat on the committee made the arguments against the bill. Nearly every member who went to the well to speak on the bill was a conservative who supported it. They tried to persuade others that they were giving the people back what was theirs and helping the middle class. Unfortunately, the bill only provided benefits for corporations and the wealthiest Kansans, leaving most of us holding the bag for funding critical state services including schools.

With seven members out as excused absences, the vote came in at 59 to 59. It is important to know that a final action vote such as this requires 63 votes to pass and on a tie vote the bill fails. Conservatives put on a call of the House under which the doors are locked and Legislators are kept in their seats until the call is lifted. The time is then used to pressure anyone that proponents believe to be “weak” in an attempt to get the win. Often the Highway Patrol is sent out to bring absent Legislators back. A call can go on for hours.

In this case, because they were working on Sine Die, the last day, they could not go past midnight. So if people held their positions until midnight the bill would fail.

There were a number of calls to raise the call of the House but if 10 members object, it is not lifted and so the call went on and on. But no votes changed. It held at 59 to 59 until a call to raise the call was successful. Speaker Ryckman (R-Olathe) asked if there were any explanations of vote. There were none. He asked if there were any changes of vote. There were none. He closed the roll, tallied the vote, and declared the bill dead. You can see how your Representative voted by clicking here.

Another tax conference committee report dealing with motor vehicle rebates was quickly passed and the House adjourned Sine Die.

Thanks to the failure of HB 2228, there is a greater chance that schools will be open come August and that a special session is less likely. Understand that both are still possible! We won’t know until the Court finishes its review of school finance plan but had HB 2228 passed, a special session and closing of schools would’ve been almost assured.

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When it comes to tax policy, what’s the rush is indeed the question of the day.

Last night at a 9:00 tax conference committee meeting, Sen. Chair Caryn Tyson (R-Louisburg) was insistent that urgency was necessary, demanding that the committee return at midnight after giving the staff a couple hours to draft extremely complex amendments dealing with the repatriation of overseas profits for tax purposes. Corporations, many of which don’t believe they should have to pay taxes and are notorious for using “shelters” to avoid taxes, are determined to stop tax provisions that make them pay their fair share of the responsibility for funding services. Tyson is determined to do whatever corporations want. Hence, the urgency. Let’s pass something after midnight without giving anyone the time necessary to really review a proposal and determine its impact on the state budget both immediately and long-term.

Fortunately House members, led by Committee Chair Steven Johnson (R-Assaria), are trying to be more deliberative and resisted the call by Tyson to continue into the wee dark hours of the morning when everyone would be sleep-deprived and unable to do such important work thoughtfully.

We all know the quality of work done after midnight. The Kansas Legislature is known for waiting until the last minute to get down to work and often ends up very late at night or early in the morning frantically passing the most important bills of the year. And they end up making grave errors in the process. One need only look at this year’s school finance bill with an $80 million error.

It would appear that Tyson’s goal is to maximize the depression of revenue to the state. Perhaps she wants to demonstrate her commitment to exploding deficits as if that is a qualification for a member of Congress (she is a candidate for Congress). The problem, of course, is that, unlike the federal government, the state cannot deficit spend. Kansans know better than anyone what that means thanks to the failed Brownback tax experiment.

Since the budget is being built on the assumption that all of the revenue available or predicted to be available is there to be spent, the passage of tax cuts will push the budget under water, jeopardizing any progress being made on school funding or the restoration of other state services.

We would remind the Legislature of the 2013 lower court decision in Gannon when the State argued that they did not have the revenue to increase school funding or honor the promises of Montoy. Here’s what the Court said to that argument:

The State has argued and asked us to find the coming limitation on the State’s resources require the Legislature to make difficult appropriation decisions. The State has proposed that we find “the Legislature could reasonably conclude adjustment of state education aid to the Levels demanded by the plaintiffs would have disastrous consequences to the Kansas economy and its citizens” (P. 34 of the State’s Proposed Memorandum and Order). However,atthesametime that the State’sattorneywasadvancingthatargument,theLegislaturepassedtheincome tax cut.AccordingtooneoftheState’sexperts,Dr.ArtHall,theExecutiveDirectorof the Center forAppliedEconomicsattheUniversityofKansasSchoolofBusiness,thetax cut bill willcausearevenuereductioninthefirstyear(2013)of$800,000,000to$1,000,000,000.SeeTR:ArthurHallatpp.2421-2424.WhileHallwascalledbythe State to presentevidenceofthedisastrouseffecta1.2billiondollarinfusionofmoneyin a single yearforeducationwouldhavetotheState,thesamereasoningshouldapplytoan $800,000,000to$1,000,000,000reductioninStaterevenue.

So it would seem to us – and to most reasonable people – that enacting large tax cuts at this time would be a bad decision. We believe that lawmakers should take a “wait and see” approach. Let’s see if the recovery from the Brownback disaster continues and what the real impact of the federal tax changes will actually be for Kansas.

The tax conference committee met or attempted to meet several times today without making any progress. Tyson was bitterly angry with the House members at the 9:00 meeting last night and again at the 8:30 meeting this morning. At 11:30 this morning she made an offer to the House that was seen as backtracking on some earlier Senate offers. When questioned by Johnson, she said, “Sometimes when you reject an offer the next offer might be worse.”

In response Johnson and the House members left, telling Tyson that if she wanted to meet again she could let him know. She immediately called out for a 12:30 meeting. At 12:30, we gathered for the meeting only to be told it was postponed until 1:30. At 1:30, it was postponed until 3:00.

As of this posting, the two sides continue to negotiate, but not much progress is being made. We will continue to update you as negotiations continue. It’s also important to be aware and ready to take action if and when we put out the call to do so.

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While budget negotiations between the House and Senate are definitely making some progress, the same cannot be said about the tax negotiations which took an interesting turn late this afternoon.

In earlier tax conference committee meetings, Senate Chair Caryn Tyson (R-Louisburg) made it clear that she wanted one big mega tax cut bill that included everything the Senate voted for in Sub for HB 2228 (the massive reduction of over $500 million) and a whole bunch of small tax cuts rolled in. We suppose that as a candidate for Congress she wants to demonstrate her ability to crush revenue streams just like real members of Congress!

The House, while certainly not rejecting the idea of tax cuts, has taken a more cautious approach and appears reluctant to adopt one massive conference committee report, suggesting that some ideas should stand separately.

The conference committee was scheduled to return to meet at 5:00 pm but the House was still on the floor. It was right about 5:00 when House Tax Chairman Steven Johnson (R-Assaria) made a motion to concur in HB 2492, a bill in the conference committee that contains several tax changes that Tyson wanted in the big bill (a sales tax exemption on the purchase of gold bullion, a sales tax exemption on certain hospice providers, and permission for four counties to hold elections to raise local property taxes for local projects. If the House concurred, then these items would no longer be available to be put in a bigger conference committee report; if the House did not concur, the bill would stay in the conference committee but the House would have an official position against these items. The House voted 19 to 102 not to concur.

Senators were listening in downstairs in the committee room and reports have it that Tyson was not happy. She called the meeting off and left the room. Johnson and the other conference committee members showed up and, after much discussion and calls to Tyson agreed to meet again at 9:00 tonight.

We will report on tonight’s ongoing discussions tomorrow.

Schwab Says Good-bye

House Speaker Pro-Tem Scott Schwab (R-Olathe) took a moment of personal privilege this afternoon to announce that today would be his last day in the House. He is leaving tomorrow to accompany his child’s class on a trip to Washington, DC and as a candidate for Secretary of State is assured he will not be in the House in 2019 win or lose.

Schwab has twice served in the House with his two terms of service separated by two years after losing a bid for Congress. He was briefly replaced by former Rep. Ben Hodge (R) who earned a reputation for uncooperativeness with most people under the dome. Schwab has always been a gentleman even to those with whom he disagrees. We wish him well whatever he does next.